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tv   Fast Money  CNBC  December 14, 2016 5:00pm-6:01pm EST

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overnight. you know, also, day after fed meeting is the market action that might actually have more clarity to it than the hours after. >> then people better book the european vacations. euro under 1.05. thank you so much. that does it for us on "closing bell" today. "fast money" begins right now. "fast money" starts with breaking news on what has been a crazy and historic day for wall street. the fed hiking rates for the second time in a decade. the dow getting within 35 points of 20,000 before reversing and falling more than 100 points. and all of that happening while the biggest names in tech met at trump tower. we'll have a live report. and we start with the big story of the day. the fed raising rates, investors, though, not like what janet yellen had to say. the dow having its worst day since the election. let's get straight to steve liesman for the latest on this. steve. >> yeah, so melissa, a burge of what the fed did was expected, it hiked rates but a little bit not priced in.
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the fed added a third rate hike for 2017 or the median forecast adds to the third hike up from two. our fed survey was at two-and-a-half. so the market didn't fully price it. yellen also -- and i put that word "bless" on trump's policies. that's rick santelli's words. he didn't bless it or criticize it much, but didn't bless it and the market wanted to hear these things will lead to better growth. and she said more worried about inflation, pointing out that when her counterparts were calling for what she and bernanke were calling for fiscal policy, it was a lot higher than now. slack in the economy. now i asked her at the press conference whether or not trump's tax cuts were the kinds of things that she could bless, because they raised productivity. here's what she said. >> tax policies can have that effect.
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it really depends on the specifics. i don't think there's anything that i could say in general about what tax policy would do. but that -- and i really can't tell you what the fed's response would be to any policy changes that are put into effect. >> melissa, mine was only the first such question. there were many, many more. and the fed chair tried to do a similar dance around not commenting on the policies, acknowledge that the market is looking for more growth, and ultimately i think the take-away has to be that some of these policies are going to lead the fed to higher interest rates than maybe the market thinks next year or the year after. >> sure. and a lot of the questions, steve, surrounded what the market has done since the election. not only just in equities but also the bond market, of course, the u.s. dollar. and interestingly, steve, on the heels of that news conference we saw the dollar index spike higher after that. i'm wondering if they did
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acknowledge at all the impact of the stronger dollar here on corporate profits. >> i -- no, they didn't on that score. but, look, here's what you're going to do. if you're a fed official, you're going to put the three recent developments into the pot. you're going to throw in the stronger dollar, you're going to throw in higher interest rates. both of those tend to be tightening financial conditions. but the other thing you're going to put in is higher stock market, which is a loosening of financial conditions. so the fed has to balance that and say, you know what, is the market tighter or looser than i expected, or sorry, financial solutions, and make a decision on policy from that. i think it would be interesting to hear in the months ahead, melissa, if you guys start getting the comments from the ceos about whether or not or from the analysts about whether or not the stronger dollar causes earnings expectations to decline, that would be an important factor. both for the economy and for fed policy. >> all right. steve, thank you. steve liesman in d.c. so the question tonight is has the fed put this trump rally at risk. tim, what do you say?
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>> think about this. you mentioned at the top of the show, this is a historic day because it's the second time in the last decade we raised rates. think about that. the fed is in play and no question the rates are going higher. the question is how much. and if you think about where the fed has been the last couple years, they have been out of play. they have been tightening, they have been tapering, and that in some sense has been implicitly tightening. let's face it. so the market's reaction today makes a ton of sense. when you think about where we were a year ago, the market thought, and it spent months and months deliberating, and actually dealing with the fed hike. we kind of came into this meeting, and it was as if people are saying this is was an after thought. it's not an after thought. look at the dollars break out. i do think it has an impact on stocks and multinationals. but think about the move of the stock markets into this. and the move in -- especially, look at small-cap stocks. they pulled back the most. of course, they did. russell up 16%. yields have now broken out. the dollar has now broken out. >> we were on "power lunch" and i thought initially when we got
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that decision and into the press conference, it almost seemed like it was the perfect sort of answer to what the stock market has done. they're sort of saying we're going to give you what you all expect, 25 basis points and add a hike next year, because you know what, look at what's going on since then. we're acknowledging that perhaps things are going to be a little bit hotter. what's your interpretation in how the market reacted? >> i don't think the fed wants to see the market overheat. when you see the move it had off the novemberelth lows. you look at the dow jones industrial average and it's 10% up in a straight line. when i see that price action, i think back to the early 2000. the year, early 2000 when the nasdaq went straight up. i think the fed is in a position -- i agree with what tim is saying. i think the dollar should act as somewhat of a headwind. here's a name. general electric. you would think this would be a company that should really benefit from a lot of the policy that people are expecting out of this new administration. it's basically flat on the year. they get 55% of their sales from overseas. there is that impact of the dollar. so i think when you're kind of figuring out which u.s. multinationals are going to do
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better than others, was we think in 2017, it's not so clear-cut in my mind. >> yeah, karen. >> so i thought -- i know you're talking about them threading the needle. to me, the most interesting thing today was the volatility index and the lack of any significant movement there. there was no panic, there was nothing remotely close to that. pete could speak to it much more. but i think this rally has been so strong and so much of this is already built in. this is a healthy thing. i think to have a little cooling off. wouldn't surprise me if another day or two of this, and that doesn't -- that doesn't really, you know, dismantle the trump rally. >> right. >> still very much in place. >> more of a pause of the rally, probably, right? i think the word you use, "cooling off" is exactly the way it felt. actually, what is was one of the strongest days and everyone yesterday against the financials. they were down a half percent today. they pushed right up against a penny away from the most recent 52-week highs. so you look at that, you start to look armed and it was gold. it was the energy stocks.
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those were getting hit the hardest to the down side. pulling down the market. but the financials and technology held up very well. >> so a show of hands. is this a pause in the trump rally or is the fed quell muching the trump rally? raise your hand if you think it's a pause. >> i -- this was going to happen -- >> come on! i want to know if it's a pause. >> today -- >> fine. >> so the question again. >> is it a pause in the trump rally or is the trump rally over? >> it's a pause. >> it's a pause. >> all right. >> the question -- we've got 43 minutes minus commercials. okay. so it's a pause in the rally. we see a pullback, is that your opportunity to buy. so take a look at financials, for instance. >> yeah. i think there is an opportunity out there. i think somebody like -- john talked about unusual activity. you look at a name like that. i actually still think there is some up side in some of those deals. dan is giving me a flag. >> rallied today.
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>> they pulled off but rallied extremely well. u.s. steel, ak steel, cliff all of those moving to the up side. >> i'm going to tell you this, okay? if you get the s&p pulling back to that breakout level that was 2,200, that's where you set up for the early year rally. steve liesman said it. what are ceos going to say in january? are they going to raise cap x and that is going to be a big issue. to me, where would i go? large cap tech, which has sat out the rally if you want that trade. >> and that's how it coincides with the inauguration of the president-elect. >> yeah. i wouldn't go tech, actually. just looking -- since -- i mean, google has had a very big run since it was dumped out on the rotation. i wouldn't start that here. i actually bought a little energy today. golar. i think energy has come off three or four bucks in the last, you know, two days. so could be early. that's fine. i think that -- i want to buy things on the pullback here. i think it will last more than
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today. but i'm ready to buy, not sell. >> i'm going to point out a couple things. people should be watching dollar euro, very important for markets. it's going to signify a dollar breakout. 258 is a level on the ten-year. let's watch that. and ultimately, when you get back to where you need to be looking for inflation, they have said that they actually see more inflation. not implicitly, but that is something. so you have to be watching ppi. you have to be watching cpi. >> since the election, the s&p 500 has rallied 6% but bonds have been crashed. the bond that tracks bond prices has fallen 10%. will the rotation out of bonds and into stocks continue? the head of bank of america/merrill lynch joins us onset. good to see you. >> good to see you. >> does that what i think what you're telling investors? >> no, not at all. i think we are cautious on high yield in particular. i think investment grade, obviously, has more rate risk. and treasuries as tim and all of you have mentioned, are going
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higher. treasury yields are. high yield, listen. high yield is going to be an okay place to be next year. it's not going to be the best place to be. i think equities have a good -- a good chance to outperform high yelled yield next year. the double b portion of high yield is very sensitive to rate risks. obviously, the market is sensitive to stronger dollar in terms of any companies that generate a lot of foreign sales, and there is a number of them within high yield. tech, for example. the big portion of the index, energy, is also obviously very sensitive to dollar risk, as well. so, you know, there are definitely going to be some rough spots for the asset class. i do think that single b credit is going to be okay. >> the forecast is an acknowledgment that the trump rally is intact. which is the question i was pushing on these guys. >> yeah, i think the trump rally is generally on track intact and will continue into next year. i do find it a little bit funny. it's -- the markets, right, they
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wanted to price in the trump effect of infrastructure, lower taxes and the benefit that would have on the economy. but clearly the market -- at least what we're seeing today, didn't want the fed to price in that, right, in terms of changing their forecast. to three hikes next year. eventually, the two will come together, and they will have a meeting point and markets will probably continue higher from that point. >> so i read your pieces and you talk about a lot of nuanced things in between different rated bonds. and for the average investor, that is going to be really hard to do, to be able to decipher. how did they express the bet that you're saying you would make? >> yeah. so it is nuanced. whether you can invest in double bs or single bs. that's a tricky game because you're not buying individual bonds. what i think it comes down to is the difference between active management and passive management. what it suggests to me, investors need to find active managers who are good stock-pickers, good credit-pickers and probably shy
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away from some of the etfs. >> what sectors do you think look the healthiest in this rate environment? >> so i think in this environment, we probably -- we probably are going to like some of the lower yielding aspects of the market. so you're going to want to stay away from, you know -- or shouldn't say that. you want to stay away from health care. easier to find what i don't like. i don't like health care, we do like energy. that's sort of the offset. a lot of reasons why we don't like health care. high yield is a little nuanced. you have, you know, a community and big hospital names realizing their own unique pressures. you're realizing some of the phrma companies that are realizing some pressure. so we don't like health care. we do like energy here. we think energy is okay right now. we'll see how that evolves with the dollar and commodity prices. but i think energy right now is an okay bet. >> okay. michael, good to see you. >> good to see you, too. >> how do you translate what michael as i say about high yield into equities. >> >> when mike has been most
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bearish, also about the earnings side of the companies. is that happening? that's good. or is it inflation? that's bad. ultimately, we have a case here -- i agree, energy is probably going to continue to outperform. emerging markets sold off 3% today. the em debt etf for those playing at home is another way, i think, to interpret how high yields should perform. but in the case of em, getting hurt by the currencies. i think it's an opportunity. >> doesn't like retail. does that concern you about retail, the equity side of it? >> the retail names i like, one of the things we like is a good balance sheet. a lot of them are net cash and a lot to do in net cash. some of the risk erstuff, not for me. >> as everyone has gotten this sense of certainty about what's going to happen with deregulation, tax cuts, infrastructure spending. it's crossing the tape right now. united technologies see 2017 adjust to the epps below what the consensus is. consensus looking for $6.60, guiding to a midpoint of $6.45. we have seen stocks make new
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all-time highs here, discounting a whole heck of a lot of stuff that has to go very well in the new year. that's my only point. a year ago at this time the fed forecast four rate hikes in 2016. >> the push backe i get on twitter and from people who talk to me about the show, the twitter. jack dorsey not invited to the tech meeting, is that you could have said that for a long time. and you have to acknowledge the fact that this market has a momentum, an animal spirit, whether you like that term or not, pushing more -- >> i've been around -- >> it's not a science. >> i've seen a lot of goofy stuff in the markets. this is as goofy as it gets. and to think there is not a 50/50 chance the markets don't give back all of these gains over the next six months is crazy. it's a very even bet right now. just because they have gone up in a straight line -- >> let me -- a 50/50 bet. at any time one could say a
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50/50 bet is reasonable. you think nothing that is really structural has happened here? i do. >> structural. >> in terms of a republican-controlled -- all three branches. >> i don't think anything -- i don't think anything is structural has happened. >> not the word structural. >> pete najarian -- >> let me just finish. a significant event has happened that could effect stocks. >> maybe. >> maybe? >> maybe. >> you think -- >> i think it's a big maybe. i really do. what did dick fisher say to you, pete najarian? he said that reagan didn't get his tax cuts until when? what term? >> second term. >> yeah, second term. >> you listen to all of this stuff. >> you were on fire today. >> i was on fire today. no doubt in my mind. he talked about 4 and 5 mercedes growth in the high yield. the reason i think that's interesting, but why i wouldn't want to be there is, i would rather be in the banks where you've got a low -- and the technology names where you've got a low epe and a yield,
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outperform by double that. coming up, $3 trillion worth of tech ceos to talk to the president-elect. we'll get the details from the ground and the company that could emerge as the surprise winner. plus, could cutting the cord cost more consumers? we've got the details on what it could mean for the mainly media stocks. and fedex and u.p.s. facing major holiday shipping problems but could be a good sign for retail. what traders are betting on. much more "fast money" still ahead. ♪ and if you want to be free, be free ♪ ♪ 'cause there's a million things to be ♪ ♪ you know that there are ♪ and if you want to be me, be me ♪ ♪ and if you want to be you, be you ♪ ♪ 'cause there's a million things to do ♪ ♪ you know that there are ♪ i'ts your tv, take it with you. with directv and at&t, stream live tv anywhere data-free.
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generosity is its oyou can handle being a mom for half an hour. i'm in all the way. is that understood? i don't know what she's up to, but it's not good. can't the world be my noodles and butter? get your mind out of the gutter. mornings are for coffee and contemplation. that was a really profound observation. you got a mean case of the detox blues.
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don't start a war you know you're going to lose. finally you can now find all of netflix in the same place as all your other entertainment. on xfinity x1. breaking news on the latest yahoo! breach. jackie deangelis in the news room with more. >> we reported the details on what yahoo! the clarity they gave us on the security breach earlier. i just wanted to follow up with our comment we got from verizon. their statement on this issue. the company saying, as we said all along, we will evaluate the situation as yahoo! continues its investigation. we will review the impact of this new development before reaching any final conclusions. verizon declines to comment beyond this. obviously, verizon announcing a plan to buy yahoo! in july. so this would certainly be of interest to them to follow up on. verizon shares in the after hours are unchanged, melissa. >> all right, jackie deangelis, thank you so much. do we care about this?
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>> we care about it as far as verizon strategy. people wondering if there was a material adverse change to this deal. it would be bad for yahoo! but yahoo! still has a ton of cash. still have some of the ali baba stuff or whatever. think about all of the stuff about tech going on in this election moment demand is soaring past expectations. is this a bullish sign for retail? karen, what do you say? >> i hope so.
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i'm not quite sure what to make, because we talk a lot about online sales versus bricks and mortar. and those are blurring, because a lot of bricks and mortar stores are now becoming mini distribution centers for online orders. so we can't parse out exactly what -- any sort of struggling, because of too much demand, i think, is a good sign. >> don't we hear this every year? seriously. this is an annual story. and -- >> why can't they get on top of it? >> this should not be a tell on how great things are. so for the retail sector and the fact they may be taking charge and doing more of their online business. i don't think this tells us suddenly things are great and these guys are getting their butts kicked by amazon. >> so flip it. what does this mean for u.p.s. and fedex where every year this is an issue. >> are you doing an either/or right now? >> maybe a choice is neither. i don't know. >> no, i like fedex here. i do think valuations are a
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stretch but they're going to kill it in the holiday season. u.p.s. up and down every year. one year they have too many employees, next year they don't have enough. they have never gotten it right. >> when guy quit, they were obviously one short. >> lose guy, and it's brown cau trousers. >> and a lot of packages. >> sure did. no, look. fedex to me is -- i think not only because the transports have probably led this rally higher, fedex core business, first of all, is becoming more profitable. they are growing. their european business, the acquisition and integration of tnt is finally paying off. >> that's taken some time. >> and now paying off in terms of margins. they have pricing power. i would be buying any weakness here. >> can i make a point about amazon? we have talked about how stocks have performed very well. we know that amazon and facebook have not really joined this trump rally. and you know, these are two stocks that are two of the top five biggest in our markets when we were heading into earnings last month -- or excuse me, back in october. and these stocks sold off precipitously afterwards. and one of the things, if amazon
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can't get going in this rally, i don't think this is a stock you want to own into their q4 report that will come in late january, because -- >> is it the report or is it the fact that maybe donald trump talked about them and talked about the taxes and an unfair environment so their numbers shouldn't be affected. >> i think -- >> we'll talk more tech later on. >> okay. >> follow the program. >> okay. thanks. >> still ahead, one group of stocks nearly 30% this year and a top analyst to explain why this hot trade could get hotter. i'm melissa lee. you're watching "fast money" on cnbc, first in business worldwide.. in the meantime, here's what else is coming up on "fast." >> the biggest tech ceos of the world gathered with president-elect donald trump. and here's what happened. >> i was kidding! i was only kidding! >> and one tech stock that could emerge as the unlikely winner. plus gm shares tumbled today on concerns china could come down on the auto giant. is it just the start of a bigger
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trade war? the answer when "fast money" returns.
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♪ ♪ taking care of business >> turning it up -- >> in my trans am.
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welcome back to "fast money." a wild day on wall street. the dow s&p and nasdaq hitting a record high this morning and falling sharply following the second rate hike in a decade. the worst performance in more than two months. here's what's coming up in the second half of the show. a dip today on reports that china will slap a penalty on an unnamed u.s. automaker. should investors pump the brakes? we'll plain. and later, think cord-cutting will save you cash? the new study that says cancelling cable could cost you more. the president-elect, donald trump sitting down with some of the most powerful leaders in
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tech. cnbc's jon fortt is outside trump tower with more. quite a parade going in, jon, to watching all of the tech ceos go into the golden elevator. >> i don't know that we have seen a meeting quite like it, particularly in a setting like this. not the white house, but fifth avenue. in new york. now, none of the ceos coming out of the meeting spoke specifically about it. but we did just recently get a statement from jeff bezos. he said i found the meeting with the president-elect to be very productive. i shared the view the administration should make innovation one of its key pillars, which would create a huge number of jobs across the whole country in all sectors, not just tech. agriculture, infrastructure, manufacturing, everywhere. he used the word "huge," one of the president-elect's favorite words. now a readout i got from the meeting, someone familiar with what was discussed, said the mainly topics were jobs, immigration and china. the tone was friendly, they
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covered a lot of ground. this person also characterized it as productive. sub topics included security, education and particularly vocational education and the repatriation of foreign profits, cash that is overseas. that's hundreds of billions of dollars worth held by the likes of apple, google, oracle and cisco. regulation also came up. now i'm told the president-elect raised the prospect of meeting quarterly with this group. that he received some positive feedback on that. but, i mean, what else are they going to say, sitting in the room with him? i would be surprised if all of these executives meet quarterly. jeff bezos doesn't even do his own company's earnings calls quarterly. so coming to washington or new york would surprised me. but this is a year of surprises. we'll see how much of this informal information translates
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into technology policy once the president-elect takes office next month, melissa. >> what i thought was interesting, jon, you reported earlier in the day that prior to meeting with the president-elect, these ceos actually had a pregame meeting. maybe to set some strategy. maybe that's why we're -- they're sort of acting like a monolith in not revealing what was said behind the closed doors. >> reporter: some of them did. i asked a couple of companies specifically if they attended it. and heard that a couple of them did not. so i'm not sure exactly who did attend that premeeting. that someone was trying to organize. but, you know, it's unusual to have this volume of top tier, you know, hundreds of billions of dollars each, many of them, in market cap gathered together in one place. i mean, they're in silicon valley. normally doing other things. so it would have been interesting, not just to be a fly on the wall in the meeting with the president-elect here at trump tower, but also for those that might have met earlier what they discussed ahead of this
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meeting, melissa. >> all right, jon, thanks so much. jon fortt outside trump tower for us. an extraordinary meeting there today. what does this mean for tech? we were just talking about how tech has largely sat owl this trump rally. >> no, listen. i think you have to go back -- someone sitting there, the ceo of ibm, she sent an open letter to president-elect trump on november 15th, talked about the need to create new collar jobs. i think a lot of those people at the table, while they're working on technologies that are really going to crush job growth going forward in a new age, i think it's important to actually think about how they can create these new collar jobs and i think that's what she wants to do and a lot of those guys. >> the question is, how are we going to create jobs not only in a world where technology is taking them away but for companies that need to manufacture elsewhere. elon musk and tim cook held ton to another meeting or stayed for another meeting. they produce stuff. they manufacture stuff. and elon musk is doing a great
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job of keeping those jobs in this country. apple says they are building their phones -- designing and building in china. so this is all about jobs. i think this was clearly going to be -- this is what i want from you and this is what i expect from you. >> you know, in having this conversation about this tech meeting today, a lot of people said it's their fiduciary duties against what karen swisher wrote about them being sheep, because they were largely against trump prior to the election. they had a fiduciary duty to go and attend that meeting. on the flip side, did they have the fiduciary duty prior to the election to not come out and endorse a candidate or not be against a candidate? and to remain neutral? if they are expected to go into that meeting -- and be respectful -- >> there are two different things. whatever their politics are, which i actually think companies really shouldn't be in the business -- i know we talk about a grub hub or something like that. you don't know all your constituents. they may have respectful owely.
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we don't know what happened. they may have been quite respectful, yet not agreed with what was being said. we don't know that. >> right. >> i do think they do have a duty. i'm not sure if it's fiduciary or what. maybe just as an american. to meet with the president-elect if he wants to meet with you. whether or not you -- >> to give ideas, to go back and forth about where they're going and how maybe there is a way to create some sort of jobs and the rest. the one thing that will be a hamper on trying to get the job creation is, i think we're going to see more and more m & a maybe next year in technology. i think there are a lot of names -- when you look across today, there was a piece out where oppenheimer was talking about a target. f5 is a toorth. there are all kinds of targets right now. and as we see some of that consolidation and m & a going forward will cut back -- >> immediately, though. the longer-term goal of colorado somedation is to grow the cop company. >> you take out competitors and cut costs. listen, back to your question
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about what they were and how they stood before the election and what they do after. the way i see it is a little different. i mean, these people, they rely on foreign workers to come over here. to get the best possible talent or whatever. there was no respect in that campaign. he was -- he was insulting lots of different groups or whatever. and i think those people have the right to stand up for it, and i think they have the right to go meet with them too. you bring up kara's point. at the end of the day, these guys have companies to run, businesses to run and shareholders and doing what they should be doing. >> let's talk about elon musk. tesla shares got a boost today, the second day in a row where tesla outperformed technology. ceo elon musk at the economic advisory board, joining a host of other business leaders, including jpmorgan's jamie dimon, bob iger. tesla shares around 5% since the election. is tesla now becoming a donald trump stock? we ask that because theoretically, tesla they do
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manufacture here in the united states. not only do they manufacture their cars in the united states, in terms of the fremont factory but also building another giga factory and sole la city has their factory in upstate new york. they're committed to being here in the united states. >> they sold 50,000 cars here last year. if they are going to sell 50,000 or 100,000, they have to make them in china, that's a fact. >> tesla's issues are about free cash flow and deliveries, not things the government can help them with. there may be reasons to keep them at home. i'm guessing, yes, trump will do everything he can to stimulate the businesses and he should. they're great businesses and elon musk is an innovator and american. >> he is counter, though, to trump seeming -- bracing fossil fuel, right? and really -- you know, so -- the obama administration was far more -- the alternative, absolutely. renewable -- >> this guy -- >> and tax -- the policy was
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such to, you know -- >> sorry. >> so i'm just wondering, he is not -- you know, he would be more of what you would think of particularly -- >> i think that's -- that's very good news and that's very balanced and that's what it should be, frankly. and pete may be right. we may have been way too far on the other side. a lot of the energy policy before made sense. >> you could love both. >> the one interesting thing about mr. trump so far, one month into the post election. he's willing to give and take. he's willing to negotiate. and all of the rest of that, thou though, right? he gives, he takes, it's interesting. you talk about exxonmobil, for instance, rex tillerson. you look at that company. they have a lot more than just oil and just gas. that's a company that's on the other side, as well, doing a lot of alternative. this is a trump stock and i think the innovation side, the fact that it's all less, and the fact he's embracing this i think would be something that would be great. >> still ahead, more and more americans are cutting the cord. but a new study shows it might
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not be as cost effective as you think. and that could be good news for a number of stocks. we'll have a special report. plus, the merger between two major airlines today beefing up competition in the space. phil lebeau all over that story. phil. >> reporter: melissa, one of the great attributes of alaska airlines as it's grown over the last couple of decades habits a niche carrier with great customer service. it's now the fifth largest carrier in the u.s. so can it maintain that great customer service? we'll talk about that when "fast money" returns. matters. ond both on the track and thousands of miles away. with the help of at&t, red bull racing can share critical information about every inch of the car from virtually anywhere. brakes are getting warm. confirmed, daniel you need to cool your brakes. understood, brake bias back 2 clicks. giving them the agility to have speed & precision. because no one knows & like at&t.
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alaska air becoming a major player in the airline industry after completing a merger with virgin america. cnbc's phil lebeau has got the latest. >> reporter: melissa, they wrapped up that merger to officially close this morning and now alaska air with virgin air as part of its system and the brand will go away, just alaska. the fifth largest airline in the u.s. yes, alaska did have to trim its code share agreement with american as part of making the deal go through with department of justice. it's the exposure they now have on the west coast that was already strong and now even stronger. that's the basis for future growth. >> this really gives us california. virgin america has a huge
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presence, both at sfo and l.a.x. together when you combine the strength of alaska with virgin, we will have great strength up and down the west coast. in fact, we'll have the largest market share of any airline serving the west coast. >> and they plan to use that market share to not only grow in the western u.s., but also across the country. look for more transcontinental flights in the future for sure. here are the five largest airlines you've got american, delta, united, southwest is fourth and now alaska is number five. and one interesting thing, guys. take a look at the stock since 2009. this is pretty much unheralded by a lot of people. people always talk about when they talk about airlines. the largest players. well, over the last, what, serve, eight years, alaska has been a great investment for people who have been looking to play the airlines. let's see how their growth continues now that they are bumping elbows more frequently with the big boys especially as they try to grow outside the west coast. >> phil, thank you.
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phil lebeau. alaska just one of the airlines giving the group a push higher. the airline index soaring 29%. our next guest predicts it could go higher next year. jpmorgan jamie baker considered one of the top airline analysts. welcome. >> thank you. >> this sounds like there is going to be more pricing pressure. is it just that there is going to be much more demand for travel next year? >> well, look. higher fuel prices, believe it or not, are a good thing for the industry. they bring out the best in management. okay? they lead to more capacity, discipline. they lead to more emphasis on ticket pricing. the problem we had with airline stocks last year was when fuel was cheap, the sentiment, the perception was managements were -- they were just kind of, you know, phoning it in. investors want to see management sweat. concentrate on pricing power, and in response, they will deliver a higher multiple for the sector. >> what's a sweet spot in terms of fuel prices?
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>> well, look -- right or wrong price -- >> sweat, but not too much. >> right around where we are now. quite frankly, another 5, $10 a barrel would probably be beneficial, you know, to the space. fact of the matter is, the economy is strong. you know, the airline stocks are really reflecting the fact that around mid august, these managements final started responding to owners who were insisting. we actually cut earnings this fall and yet -- you have seen what the stocks have done. >> so jamie, a bunch reporting numbers. american had much better -- this is the metric we're following. did that surprise you and tongue these guys are actually running better in the fourth quarter and therefore we will see much better numbers. very pessimistic. >> yeah. look. i think that a lot of the pricing weakness we saw, particularly domestically earlier this year was self-inflicted. like i said, managements got
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sloppy when fuel prices fell and some of them used it as a competitive weapon. the owners got through to the managements. we're seeing better traffic trends. there has been an appreciable uptick in bookings. so, yeah, we see the trends continuing. what you really need to remember is that the airline industry itself has evolved. where we haven't seen evolution yet is in how the market views airline earnings. that's the next step. and that, in our opinion, is what drilled the about-face from berkshire hathaway, disclosed earlier this month. >> so what's your top pick? >> as luck would have it, our top four airlines, american, delta and united and southwest control 90% of the domestic market, happen to be the same names where we saw that about-face from berkshire hathaway. i think for the long only getting involved in the space for the first time, i think that delta and southwest probably allow you to sleep a little bit easier at night. just fewer moving pieces, a little less execution risk. certainly than alaska and also
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united and american. those are more for the die hard investors with a little bit thicker skin. but we like all five. >> pete, you've been in the airline space. >> yeah. and i'm in a couple right now. i'm in hawaiian, as well as delta. and hawaiian is almost like an alaska in terms of taking off to the skies. delta has got an investment day tomorrow. look for anything specific? >> investor expectations into tomorrow's event seem to be comparatively muted. so, you know, we're not looking for any big surprises. delta management probably won't use this stage to increase their dividend or their buyback. that's usually up to the boortd, something that happens in the month of may. we actually suggested to our clients, it's probably worth being long into the event because there is very, very little forecasted down side tomorrow. hopefully they'll put on a good show. >> jamie, thank you for coming by. >> appreciate it. where do we go in the airline space? >> i'm in united, american and delta. three of his four. i like it. i can the big macro question of
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can this industry be used as having some discipline and not have this peak drop multiple expansion and -- i am actually a believer. so i'm long. >> and perception of pricing power. jamie is alluding to higher oil price, gives them more pricing power. i'm in delta and united and people have gotten this wrong even though it makes sense and this is an opportunity to buy back weakness. >> pete. >> delta for sure. hawaiian is a flier you have to be involved in. >> look at you with that pun. >> and if you look at it, really, they control the west coast, they've got the hawaii, hawaiian islands, obviously and also into japan. as that increases, when you look at their unit miles, they are killing it right now. and they just got it higher for the next quarter. >> from planes to automobiles, check out shares of general motors, plunging more than 3% today on concerns chinese government could come down on the auto giant and that sparked a flurry. dan, what did you see? >> i saw something pete probably would want to make something out
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of. >> i'm going to something different out of it. call volume in gm was about two times that of puts. but wasn't particularly bullish. the stock down 2%, accelerated down 4%. one trade that caught my eye in january expiration when gm was trading $36.18. a closing seller. and 21 cents. what's interesting about that, those calls only have about a 13% probability of being in the money when they were sold a little more than a month from now. somebody who had a prior bullish bet basically saying i'm going to get what i can from these calls. because it is a very small probability they are going to be in the money. and i just want to take a quick look at gm. this is the $40 break-even on those calls. obviously, like i said, low probability bet. the stock has had this run of about a, 6% in the last couple weeks. when you think about that, that's just put it up on the year. the whole auto sector has been a massive underperformer. cheap stocks trade 16 times
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earnings. a 4% dividend yield. and look at this. this is ford. you want to see what was really horrible in this space? and barely had much of a rally here. this thing has been in a massive down trend since its highs over the last three years from now. so to me, i think this is a space where, you know, you throw in some stuff, trade, that stuff. cheap gets cheaper. so to me, i don't find the autos particularly appealing right here. >> anybody on the other side of dan's trade? >> well, i'll tell you. i've been long gm and i continue to like the trade. on the long side. i am worried about this china news. 15% of the sales. china has been an enormous auto growth market for a lot of players and i think you have to be wary. the next trump stock kind of implicitly, this is one of the names that got taken down. >> for more "options action"s, check out the full show 5:30 p.m. eastern time on friday. cutting the cord could actually cost you more money. we'll give you the names when "fast money" returns.
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generosity is its oyou can handle being a mom for half an hour. i'm in all the way. is that understood? i don't know what she's up to, but it's not good. can't the world be my noodles and butter? get your mind out of the gutter. mornings are for coffee and contemplation. that was a really profound observation. you got a mean case of the detox blues. don't start a war you know you're going to lose. finally you can now find all of netflix in the same place as all your other entertainment. on xfinity x1. welcome back to "fast money." i'm jackie deangelis.
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we had reported earlier on unconfirmed reports that heinz was looking over to take over mond mondelis. reuters is now citing sources saying that mondelez says the reports are untrue. we reached out to the company itself, it says had has no comment. if you look at the after hours session, you can see the gains have come down. their stockstill trading higher, but less substantially than we thought before, melissa. >> jackie deangelis, thank you for that. at first blush, it sounded ridiculous that a report would get back together after breaking apart. >> well, it's idiotic, if you think about it. although mondelez is the international arm of kraft and has grown dramatically. that's where all of the growth is. you can make an argument saying the same formula that worked for a lot of the companies, and cutting costs. nels
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nelson peltz, bill ackman, a lot of people involved. >> we're going to go to julia boorstin talking about how cord-cutting can cost you more money and that can be good news for some stocks. julia, what's the story there? >> well, that's right, melissa. cord-cutting isn't happening as quickly as expected. and the number of consumers who plan to stick with their cable packages is actually on the rise. >> what we found this year in the research is that many consumers are really considering these over the top or streaming services as additives rather than replacement. and, in fact, of those who have a traditional pay television subscription, we found that 84% of them plan to subscribe to cable a year from now. >> reporter: one reason consumers aren't jumping ship from their big tv bundles, cord-trimming does not guarantee cost savings. more than half of consumers who trimmed or shaved down their tv bundles are actually paying more for content than they did last year. creating a custom bundle of
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services adds up. subscribing ala cart to netflix, hu hulu, hbo and showtime to run more than $50 a month and does not include the cost of broadband. a bundle like directv now or sling tv easily surpasses the lower cost options from traditional, cable and satellite giants. pwc is optimistic for growth across all players, predicting streaming services will grow as additions to pay tv packages, rather than replacements. melissa? >> all right, julia boorstin in l.a. thank you for that. dan, you trul tried this. >> i tried it last summer. and that is spot on. i had all of those over the top things. i did have sling tv. it cost at least $120 for all of those combined and then you have to rely on your internet access for the quality of the stream. you don't have to when you're hooked up to the cable. so to me, i think it's early here. for people who know what they
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want, fine. but if you want anything live, you need to go sling. and i don't think it's there yet. >> coming up, "final trade." stay tuned.
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♪ we're drowning in information. where, in all of this, is the stuff that matters? the stakes are so high, your finances, your future. how do you solve this? you don't. you partner with a firm that advises governments and the fortune 500, and, can deliver insight person to person, on what matters to you. morgan stanley. time for the "final trade." pete. >> the airline segment we were talking about different airlines. hawaiian air is going higher. giddyup. >> tomorrow night, after work days results, oracle. >> karen. >> i'll buy some tomorrow, good things happened. >> tim.
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emerging markets got destroyed today down 3%. 50 on the em with a stop at 34. >> i'm melissa lee. thank you so much for watching. see you back here tomorrow at 5:00 for more "fast money." in the meantime, don't go anywhere. "mad money" with jim cramer starts right now. starts now. my mission is simple. to make you money. i'm here to level the playing field for all investors. there's always a bull working somewhere. i promise to help you find it. "mad money" starts now. >> hey. i'm cramer. welcome to "mad money." welcome to craamerica. call me. tweet me @jimcramer. something happened today that would have been unthinkable. the federal reserve raised rate base quarter of a percent. and the fed chief


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